Re-Mortgage Advice

jamie0691

Hope someone can offer a bit advice on our current mortgage situation.

We are coming to the end of the fixed term with Halifax, currently our balance is £74,574.99 with a value on the home of £89,950.

We are currently on the SVR which is at 3.69% (14 Day notice period of change).

First Direct can offer 2 different rates, 3.49% for 2 years fixed and 3.99% for 5 years fixed, both no arrangement fee's. I know that no-one can predict the future regarding what will happen with rates, but looking to see which would be better.

Also, is it better to choose a term which can be over paid easier. Eg a 25 year mortgage with a monthly payment of £345, but we would then over pay to £445 (as this is our current payment). Or would a 20 year mortgage with a payment of £440 be a better option. Not sure how this would work with capital payment vs interest etc.

Thanks for any help! :eek:

jamie0691

Does anyone have any feedback?

Imma_Number

If you can get a mortgage that allows you to overpay by £95 pcm every month at the same time as the regular monthly payment then there is absolutely no difference between a 25yr mortgage paying £345+£95=£440pcm and a 20yr mortgage paying £440pcm assuming the rates are the same. The 25yr one will just be paid off 5 years early.

See for yourself: http://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator
Enter 74575 over 20 years at 3.69% gives you £440pcm
Then go to: http://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator
Enter 74575 over 25 years at 3.69% gives you 381pcm so put 59 in the monthly overpayment box.

You will see that the 25yrs becomes 20yrs and if you compare the yearly breakdown between the 20yr mortgage and the overpaid mortgage they are pretty much identical (the slight difference is due to these calculators rounding the payment to the pound rather than pence)

jamie0691

Thanks for that, I have just found that tool and used it.

Suppose a 5 year fixed will be better, will just depend on wether to go for the 20 or 25 year term. I suppose the 25 Year will give us more flexibility in terms of if the rates change to a much higher rate after the fixed period. Or would this not matter any way as the payment would be the same effectively.

lee111s

You'll have the same remaining balance whether you go for 25 years and overpay or 20 years and don't. You're paying the same amount of capital off whichever way you go.